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What is Bookkeeping?

Last Update Date : April 30, 2019
Estimated Read Time: 6 min

The systematic recording and organising the financial transaction and the information related to the business on a day to day basis is known as bookkeeping. It ensures that the individual financial recorded transaction is correct and up to date which maintains the accuracy of the account and for the flexibility of the business. Let us know more about bookkeeping in this guide by H&R Block India.

Entry Systems

In businesses and other organisations, there are two common bookkeeping systems used, i.e. single-entry bookkeeping system and the double-entry bookkeeping system.

Single-entry system

Only income and expense accounts are used by single entry bookkeeping, which is recorded primarily in a journal of revenue and expense.it is mostly accepted by much small businesses. Cash book is the initial record in single entry bookkeeping which is like to checking register; it divides income and expenses to a different account of income and expense. For petty cash, accounts payable and receivable, and other relevant transactions such as inventory and travel expenses different account record are maintained in the single-entry-system.

Double-entry system

To record the financial transaction in Double-entry accounting system at least two entries are required which occur in the form of asset, liability, equity, expense, or revenue accounts. Every transaction or event changes at the minimum two different nominal ledger accounts because it is a set of rules for recording financial information in a financial accounting system.

Objectives of Bookkeeping

  1. To keep up to date record accurately for all the financial transaction, in a logical and organised manner. It ensures that the financial recorded transaction of the account effects gets reflected into the books of account.
  2. To identify the overall effect of all the financial recorded transaction of the company to the final statement. In the Profit and Loss Account and the Balance Sheet of the company, bookkeeping will finally identify the effects.


Bookkeepers are the individuals who do bookkeeping, to manage the transaction to be recorded in the systematic form of the companies, as they are given responsibility to manage the transaction which is accurate and updated on a day to day basis. To prepare the books of account which cannot be initiated if the transaction is not entered in the books.

Bookkeepers Importance

  1. Bookkeepers act as an essential individual that implement—and maintain—a consistent financial process for the financial health of your business.
  2. It helps to create and encourage uniformity in tracking, paying and reporting the financial transaction in bookkeeping.
  3. They also work to reduce your overall expenses of the company.
  4. They also ensure that books are maintained properly to avoid the payment of fees, and penalties
  5. They alert you to avoid waste and mismanagement of supplies and inventory, which can be detected by the financial transaction.


It is an illustrative and sequential day-to-day record of financial transactions also known as the book of original entry. To enable posting to ledgers the daybook’s details must be formally entered into journals.

The Day book includes

  • For recording, all the sales invoices sales daybook is required.
  • For recording, all the sales credit notes sales credits daybook is required.
  • For recording, all the purchase invoices purchase daybook is required.
  • For recording, all the purchase debit notes purchase debits daybook is required.
  • For recording, journals General Journal daybook.
  • For recording, all money received as well as money paid out is entered in Cash Day Book. It can be divided into two daybooks
    • Receipts daybook for money received
    • Payments daybook for money paid out.

Petty Cash Book

Whenever there is a purchase of small-value (expenses for stationery, casual postage, hospitality which later get reimbursed with the reason of how it was spent) the record is maintained but later gets transferred to the ledger and final accounts, so this record is known as petty cash book, it is generally maintained by a petty or junior cashier.


In the general journal daybook, journals are recorded. It is an illustrative record of financial transactions in the general ledger before their values are accounted as debits and credits. The company can maintain one journal for all transactions, and if required keep several journals based on different activities for example sales, cash receipts, revenue, etc. making transactions for future reference which is easy to summarise. There must be an equivalent credit journal entry for every debit journal entry recorded so that the accounting equation is balanced.


It is a record for the accounting. As these accounts are recorded separately, showing their opening/closing balance. It is the summary of all the amount entered while preparing journal date wise. So, the ledger takes every financial transaction entry from the journal and record the same to its similar account for each transaction which is listed in the journal.it also sum up each account which helps to prepare the balance sheet and the income statement (profit & loss account). There is two type of ledgers which are used in bookkeeping: sales ledger & purchase ledger.

What is the task involved in bookkeeping?

The below are the common transactions and task involved in bookkeeping:

  1. Billing is done for the sales of goods or services which is provided to the clients.
  2. To record the receipts from the customers.
  3. To record & verify the invoices from suppliers.
  4. To pay the suppliers.
  5. To process the employee’s salary.
  6. To process the government related reports.
  7. To monitor the individual accounts receivable.
  8. To monitor & record asset depreciation and other adjusting entries in bookkeeping.
  9. Financial reports to be generated and given.
  10. Suppliers expenses to be paid.
  11. To make the loan payments.

In bookkeeping, it is also useful for individuals and non-profit organisations and also businesses.

What is the Accrual and Cash Basis of Accounting?

Accrual Accounting

Accrual-based accounting is the books of accounts when the transactions are recorded, for the particular product or service they make the receipt of payment. In assessing the financial health of the organisation, this accounting is more appropriate.

Example: You purchased 150 units of a product, and you will pay for its next month. If these Transaction gets recorded through an account payable (liability) account. It becomes an accrual form of accounting.

Cash Basis of Accounting

It is an accounting method only revenues and expenses are recorded only if cash transaction is made. In assessing the financial health of the organisation, this accounting is unappropriated.

Example: You purchased 150 units of a product and will pay for its next month. So there will be No transaction recorded, so it comes under cash-based accounting.

Difference between Bookkeeping and Accounting

Bookkeeping is concerned with the systematic recording and organising the financial transaction.Accounting is concerned with summarising of such recorded financial transactions
In bookkeeping, the ultimate aim is systematic recording and organising the financial transaction.In accounting, the ultimate aim is Preparing financial statements.
By bookkeeping records, it does not help the Managers to take a decision.By Accounting records, it helps to assist managers to take a decision.
Branches are not there in bookkeeping.Cost Accounting, Management Accounting etc. are the branches of Accounting.
In bookkeeping, it does not require any special skill or knowledge, as bookkeepers do it.Accounting requires special accounting knowledge and skills, as accountants do it.

Bookkeeping Abbreviation

A/C/ Acc – Account
A/R – Accounts receivable
A/P – Accounts payable
B/S – Balance sheet
c/d – Carried down
b/d – Brought down
c/f – Carried forward
b/f – Brought forward
Dr – Debit side of a ledger. “Dr” stands for “Debit register”
Cr – Credit side of a ledger. “Cr” stands for “Credit register.”
G/L – General ledger; (or N/L – nominal ledger)
PL – Profit and loss; (or I/S – income statement)
P/R – Payroll
PP&E – Property, plant and equipment
TB – Trial Balance
GST – Goods and services tax
VAT – Value added tax
CST – Central sale tax
TDS – Tax deducted at source
AMT – Alternate minimum tax
EBITDA – Earnings before interest, taxes, depreciation and amortisation
EBDTA – Earnings before depreciation, taxes and amortisation
EBT – Earnings before tax
EAT – Earnings after tax
PAT – Profit after tax
PBT – Profit before tax
Depr/ Dep – Depreciation
CPO – Cash paid out
CP – Cash Payment

People Also Ask

Q. What do you mean by Imprest System?

A. It is the financial accounting system. Petty cash system is the most common imprest system. The base characteristic of this system is that a fixed amount is reserved, which after a certain period because money was spent, the amount will be again reserved.

Q. Do bookkeepers also offer payroll services?

A. Yes, Bookkeepers are employed in many industries, to do payroll services.

Q. Is a license required to be a bookkeeper?

A. No, but they can obtain optional certification or license through national organisations.

How H&R Block can help you?

Saving taxes and filing income tax return accurately becomes very easy when you have professional help. This is where we come into the picture. You can either use our intuitive tax filing platform to easily file your tax return or let our tax experts file it for you. We have a team of in-house tax experts who can accurately file your tax returns online while giving you maximum tax benefits.


  • Knowledgeable & experienced tax professionals
  • Accurate calculation & speedy filing
  • Proactive tax-saving advice & year-round support
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CA Shreya Oturkar
Shreya is a tax advisor at H&R Block (India) with intensive experience in SME taxation and audit. She holds an advanced post graduate qualification in accounting and is highly skilled in financial analysis and reporting. Apart from her professional achievements, Shreya is a talented artist with a flair for free-hand sketching!

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